One Raise at a Time | Discount Shopping But Fantastic Dividend Growth

Getting a pay raise while sitting on the couch? Sign me up! Thanks Ross for yet another dividend increase!

Something I love about dividend growth investing is that each month I get to hear about companies I own deciding to pay me more money in dividends. Just for owning a small portion of said companies. Not going and doing R&D for new products or technology. Not selling any products. Not managing any employees or inventory. Not making sales calls. All I had to do was have the foresight to invest some of my savings in excellent companies. That's dividend growth investing at work! I mean who doesn't like getting a raise for doing nothing? Dividend growth investing is far from a get rich quick investment strategy, rather you need to remain focused on the long term goal to be successful.On Tuesday last week the Board of Directors at Ross Stores (ROST) announced an increase to their quarterly dividend payout. And what an increase it was! The dividend was increased from $0.16 per share up to $0.225 per share. That's an outstanding 40.6% raise. Ross Stores is a Dividend Contender with 23 consecutive years of dividend increases. Shares currently yield 1.12% based on the new annualized payout.Since I own 56.131 shares of Rost in my FI Portfolio this raise increased my forward 12-month dividends by $14.59. This is the 3rd dividend increase I've received from Ross since initiating a position in May 2015. Cumulatively, the organic dividend growth has totaled a whopping 91.5% over that time. According to US Inflation Calculator the cumulative rate of inflation over that same time is 4.6%. Now that's dividend growth investing at work!

Ross Stores' dividend growth history is a thing of beauty. The "worst" if you can really even call it that 1-year growth rate since 1994 has been 11.7% in 2002, the "worst" 3-year growth rate has been 16.7% for the period ending 2016, the "worst" 5-year growth rate has been 18.0% for the period ending 2017 and the "worst" 10-year growth rate was 24.5% for the period ending 2017. I'll gladly take "worsts" like that any day.The 1-, 3-, 5- and 10-year rolling dividend growth rates since 1970 can be found in the following chart.

A full screen version of this chart can be found here.*2018's dividend assumes the new quarterly payout of $0.225 per share is maintained for the rest of the year.What's even more impressive is that despite the fantastic growth, the payout ratio has barely budged. That means that the business is generating enough growth to support the high dividend growth without compromising retained earnings for future growth.

Wrap UpThis raise increased my forward dividends by $14.59 with me doing nothing. That's right, absolutely nothing to contribute to their operations. Based on my portfolio's current yield of 2.85% this raise is like I invested an extra $512 in capital. Except that I didn't! One of the companies I own just decided to send more cash my way. That's how you can eventually reach the crossover point where your dividends received exceed your expenses. That's DIVIDEND GROWTH INVESTING AT WORK! The beauty of the dividend growth investing strategy is that you build up your dividends through fresh capital investment as well dividend increases from the companies you own.So far in 2018 I've received 18 dividend increases combining to increase my forward 12-month dividends by $161.11. My FI Portfolio's forward-12 month dividends increased to $6,094.36. Including my FolioFirst portfolio's forward dividends of $78.56 brings my total taxable accounts dividends to $6,172.92. My Roth IRA's forward 12-month dividends remain at $336.76.Do you think Ross Stores can continue their streak of healthy dividend increases?Please share your thoughts below.

Ross has been solid for me so far. In the nearly 3 years that I've owned it they've almost doubled by dividend payment! It's pretty amazing to see a company that can grow the dividend by 10-20% every year and not increase their payout ratios. One of the things that I like about ROST is that management generally avoids the use of debt and also keeps growth in check each year in order to have sustained growth over the long term and make sure the new store openings are done right instead of just opening new stores just because.

I like both ROST and TJX in the discount clothing space. Ross has been fantastic for me so far and I think they should be a bit insulated from the "death of retail" because part of the fun of Ross is the hunt for the really good deal. Also, if the economy starts to sink they should see an uptick in their business as more people "trade down" to the discount retailers.

Ross' dividend growth has been fantastic of course the yield leaves a lot to be desired which I think is one of the reasons that ROST and TJX aren't widely owned companies among the blogs that I follow. I like that management takes a conservative approach to growth and the build out of new stores instead of just trying to grow as large as possible as quickly as possible. It makes for sustained growth over time and lessens the odds of a catastrophe with trying to grow too fast.

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